The Open Society and its Friends

Christopher Huhne

It is barely more than a year since the Poles installed their first non-Communist government for forty years. The anniversary of the breaching of the Berlin Wall is still to pass. Yet it is already clear that 1989 was a turning-point in European history, worthy of comparison with 1789, 1830, 1848, 1870, 1917, 1945. A political order is marching off the stage just as the clerics, the Bourbon nobles, the Prussian Junkers and the Fascists once did. General Jaruzelski is a figurehead who is shortly to resign. Erich Honecker has retired in disgrace. Nicolae Ceausescu is dead. Only one of Eastern Europe’s Communist Parties – the Bulgarian – survived the test of free polls. Everywhere else, there are new forms of politics, not all of them pleasant, wrestling with the future. It is almost certain that the old Communists have been exorcised for good. As the Russian armies return home, there can be no re-establishment of the status quo ante.

Eastern Europe’s freedom is due to the replacement of the Brezhnev doctrine with what Gennady Gerasimov called the Sinatra doctrine: they can do it their way. This enormous shift in Soviet policy is one of the most mysterious changes of the last two years. Why did the regime which invaded Hungary in 1956 and Czechoslovakia in 1968 not invade Poland in 1989? The most plausible explanation is that the Kremlin lost its faith in its own capacity and right to govern, a weevil of doubt which was to bore into the timbers of every other Communist regime in Eastern Europe. This was greatly facilitated by a generational change at the top. Mikhail Gorbachev, who came from the KGB, is the first Soviet leader without adult experience of foreign military invasion. His attitude to the West was bound to be less suspicious. For the élites, whose access to Party stores stocked with Western goods was a constant reminder of their own backwardness, the evidence of the failure of central planning was steadily accumulating.

The growth shown by official figures was increasingly a mirage. It overstated income by understating price rises. Services, the most rapidly growing part of most Western economies, stagnated. As Abel Aganbegyan said, in one of the first honest appraisals from within the Soviet Union: ‘In the period 1981-2, there was practically no economic growth. Unprecedented stagnation and crisis occurred, during the period 1979-82, when production of 40 per cent of all industrial goods actually fell.’ The crisis of Communism had arrived. Economic reform was needed, but for that to happen there had to be an increase in investment, which would in turn require a shift from high defence spending, and an opening to the free world, which is where the technology is.

Why did the crisis take so long to mature? The principal reason was the growing complexity of modern economies. Countries can dispense with the use of markets as the principal instrument of economic organisation if their objectives are clear and simple: rural electrification; basic housing; heavy industry. It is not a pleasant strategy, since a country which adopts it also needs to coerce its workforce, as the usual market incentives are not available. During the Thirties, Stalin pursued exactly this policy. Forced saving and forced labour allowed the Soviet Union to build an industrial capacity at a remarkable speed. In its own brutal terms, Stalin’s ‘socialism in one country’ worked. Such a centralised, planned system cannot be durable, however. The more complex products and processes become, the less possible it is to pull off the same trick. The sheer number of decisions and amount of coordination cannot be centralised in one planning organisation without making the system grind to a halt.

Central planning also involves a growing problem of corruption. In a competitive market economy, producers must compete to meet consumer needs. If one firm fails to please, its customers will shift to others, rewarding those which provide what the customer wants and undermining those which do not. The lack of markets under Communism means that economic decisions are left to bureaucrats and politicians – an unaccountable power which in turn means that there is a great temptation to bribe. Decision-makers pursue their own interests rather than those of the state or the consumer. In short, complexity and honesty require competitive markets. History is on the side of economic pluralism.

These essentially economic origins of the changes in Eastern Europe have led many to argue that the revolutions of 1989 represent the final triumph of the Western idea, including Western capitalism. This is, indeed, the central theme of Francis Fukuyama’s notorious article ‘The End of History?’. For Fukuyama, no fundamentally conflicting ideas of the state or of order remain. Instead, we will live in an era of the anti-hero. ‘The end of history will be a very sad time. The struggle for recognition, the willingness to risk one’s life for a purely abstract goal, the worldwide ideological struggle that called forth daring, courage, imagination and idealism will be replaced by economic calculation, the endless solving of technical problems, environmental concerns and the satisfaction of sophisticated consumer demands.’ One of the themes of Sir Ralf Dahrendorf’s Reflections on the Revolution in Europe is that this view, perhaps the dominant one in both the West and the post-Communist East, is simple and wrong.

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